How are prices holding in the north end of Norristown? Is this a good place to invest in a rental for the long-term?

Asked by Brian, 19406 Fri Dec 10, 2010

I'm considering purchasing a single-family home from a homeowner I've known for a long time (private listing) located in the north end of Norristown near Eisenhower Middle School (off Markley) and renting it out for the next 8 to 10 years. Do you have any thoughts, based on your experience, whether housing values in that part of town will appreciate significantly during that time frame? Do you think this is a wise part of town to invest in or should I look at other properties outside the borough completely? Your feedback is much appreciated.

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Thomas Richa…, , Philadelphia, PA
Thu Mar 31, 2011
My 2 cents (even though its only worth 1)
As a hobbyist rental property owner, I've always avoided Norristown because of the extremely high property taxes and the vast number of rental properties there. These taxes have to be figured into your calculations along with purchase price, upkeep and maintenance costs, insurance, vacancies... etc etc.
I have always lived by a simple "1% Rule" which is: $Rent =/> 1% of the purchase price. Based on this rule and Brian's (Mittman + Rehling) median sold price of $155,000, the median rent should be $1,550/month for the area. If the property doesn't meet this simple calculation, you will NOT make money on it in the form of rental income. Obviously this is an over simplified formula, but it has served me well.
Good luck
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Jennifer Day…, Agent, Phoenixville, PA
Sun Dec 12, 2010
Hello Brian,

I am very familiar with Norristown as that is where I grew up and many of my family members still reside there. It isn't an area you make a purchase in with the intent of selling it at a later date with appreciation. If you are purchasing to rent the property and will keep it for many years just make sure that the rent is coverning the mortgage and will give you a positive cash flow. It also depends on the amount you are purchasing the property for. If it is below market value and you are going to make improvements to the property it may work for you.

If you are searching for areas that have had appreciation and will continue to have appreciation once the market changes to a Seller's Market look at the areas individually. Find out what the homes sold for 5 years ago during the good years and now. That will give you a good indication of where the market will head when we turn. I can tell you that I have never seen a significant appreciation in the area you are speaking of in my 10 years of Real Estate nor when I lived there.

Jennifer Daywalt, Realtor
Re/MAX Results Realty
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Eric Rehling, Agent, Conshohocken, PA
Sat Dec 11, 2010

I also wanted to weigh-in, as your question is definitely a good one. I pulled some quick statistics for you. Obviously, a very rough estimate, but the data I reviewed included information based on the past five years of sold history in the area roughly around the zoo and middle school that you mention. The average median sold price is $155,000 during that span. The five years was used as it includes some of the "good" years and the two years or so since then.

The best advice as I can give to an investor is to run your appreciation numbers based on historical averages (3-5%). It tends to be a more conservative approach, but to me builds in a margin of safety for the investor. Of course, if the appreciation kicks in all are happy, but if it doesn't you'll still have a sound investment on your hands. I hope that is helpful. Thanks.
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Edmund Choi, Agent, Paoli, PA
Sat Dec 11, 2010
Appreciation has never been a primary factor for an investor to purchase in the borough unless your acquisition price warrants a capital gain. There are too many factors placing tremendous pressure on housing prices. However, analyzing the income and tax advantages surrounding a purchase in the borough is a more prudent method of determining ROI. Good Hunting!
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Carol Cei, Agent, Maple Glen, PA
Sat Dec 11, 2010
Brian, I wish that I had a crystal ball....your question is a tough one. Let me tell you what I heard last week at a convention for Real Estate Professionals:
Prices will continue to fall through mid-2011. They will slowly start to creep back and then maybe, by mid 2012, we will be back to today's prices. After that, the hope is an average of 3-5% appreciation per year which is the long term historic trend according to NAR.

If you are getting it at a great price and can get good rental income, you should be ok. If you're never planning to live there, think about a duplex or triplex. Then you are never stuck with paying the entire rent in the absence of your tenants.

Good luck with all

Carol Cei
ReMax Action Realty
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